Group for Hispanics Puts Twist on Check Cashing

The National Council of La Raza is getting into the check-cashing business as part of a plan to get more people with low to moderate income into the financial mainstream.

The Hispanic advocacy group's first shop opened last week in Denver and is called Mas a Ti (which the council said translates as "more for you").

It aims to have 50 more sites across the country over the next five years.

The shop offers all the services of a typical check cashier but at a lower cost. It also has space for providing financial education to the unbanked and underbanked.

"Our goal is to create a model where nonpredatory services can be provided," said Lautaro Diaz, vice president of housing and community development for the council. "But it is also a new way to attract low-income folks to engage in financial education so they can better prepare for their financial future."

Besides the usual check cashing, remittance, bill payment, and money orders, this money-services business offers counseling for homebuyers, tax help, and classes on budgeting, Mr. Diaz said. Eventually it intends to add individual development accounts, savings accounts that offer matching funds for those with low incomes.

To run this first venture, the council has paired with Del Norte Neighborhood Development Corp., a Denver organization that provides mortgage counseling and develops housing for seniors and people living with HIV/AIDS.

In 2005 the council received $450,000 in grants from the likes of JPMorgan Chase & Co., Allstate Insurance Co., and Freddie Mac to lay the groundwork for the program and open the initial shop.

It chose a location in Denver's heavily Hispanic West Colfax neighborhood.

Though the program is meant to help any people disconnected from traditional banking services, Mr. Diaz said the council will put all of its shops in predominantly Hispanic communities.

It is doing so, he said, because about 36% of the roughly 45 million Hispanics in the United States do not have bank accounts, according to data from the council.

Instead these people often use nontraditional services such as check cashers, which are pricey and can be predatory, Mr. Diaz said.

Check-cashing fees at the council's new venture are 1% to 1.5%, depending on the check amount. Mr. Diaz said a typical check casher charges about 20% more.

In recent years many banks have reached out to the growing Hispanic population. Some, including El Banco de Nuestra Comunidad in Buford, Ga., and Solera National Bank in Lakewood, Colo., have carved out a niche of focusing on Hispanics.

However, a survey of 340 banks conducted by the Independent Community Bankers of America this summer found that less than half offer lead-in products similar to those at Mas a Ti, such as check cashing or remittance.

Marvin Kelly, the executive director of Del Norte, said check cashing is an effective way to reach the unbanked and help them move into mainstream banking. He said it is important for people not to open bank accounts before they understand the financial system.

"Directing a family to a bank before they are ready is often a very bad mistake," he said. "With all the fees that can accumulate for things like overdrafts, it can ruin your credit and cost you a lot of money."

The council plans to partner with other community organizations to open shops nationwide. It estimates that each opening would cost $200,000 and plans to raise the start-up money through grants, some of which it hopes will come from banks, Mr. Diaz said.

"Now that we have done the first one, we are planning to use the model to interest other investors to help us replicate it in cities across the country," he said.

For many Hispanics, their first interaction with a bank is when they buy a home, Mr. Kelly said.

But financial acumen is needed well before someone buys a home and for far more than that one transaction, he said. "Financial literacy goes beyond how to buy a house."

While the mortgage crisis is widespread and not segregated to one specific group, Mr. Kelly said low-income homeowners would have benefited greatly from more financial literacy up front. Del Norte offers both pre- and post-purchase counseling to first-time homebuyers and helped 427 homeowners deal with delinquencies and foreclosures in the first nine months of this year — 37% more than in all of 2007.

The council had intended to quickly follow the Denver opening with a second shop in Philadelphia, but those plans were put on hold. It was expecting a major contribution from American International Group Inc. that fell through after the insurer's $85 billion government bailout.